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Part - II

The Evolving Market: From the Sellers' Viewpoint

The demand for consumer goods in India grew by about 15% between 1993 and 1998. However, since 1999, this rate has dropped to below 10% with some FMCG majors reporting shrinkage in sales volume. Although consumer durables are performing marginally better, it is almost unequivocally acknowledged that it is next to impossible to sustain immediate post-reform growth rates. Analysts have attributed this to the "maturing" of the market and there precisely lies the fear that the Indian consumer is showing saturation at levels sub-optimal with respect to global averages. Whatever be the outcome, different schools of thought seem to concur that the "face" of the Indian consumer is undergoing a change, the reasons of which are worth investigating.

If one starts at the macro level, a slower growth in the disposable income has met with an explosion of sorts of the choices that today's Indian consumer is facing with. Hence, the battle for every Rupee spent by her is getting more and more intense. To make matters worse, one can add on to this the characteristics of the Indian market that encourage market inefficiency to creep in. National Council of Applied Economic Research (NCAER) classifies the Indian consumer into five categories - the Rich, the Consuming, the Climbers, the Aspirants and the Destitute - in order of decreasing per capita income. If one goes by the NCAER projections for 2005-'06, then the top two brackets, in spite of witnessing 100% and 37% growth respectively (over 1999-'00), will still contribute less than 39% of the number of households in the country. This gets translated into an interesting observation that existing players are facing - lower penetration, albeit increasing, in the larger segment and a higher penetration in the smaller more affluent segment. The catch is that, in spite of this anomaly, the less affluent segment churns out higher sales than their upwardly mobile counterpart. Hence determining an optimal price point and a revenue model in general becomes extremely challenging in such an environment. In addition to this, like all emerging markets, psychographics of Indian consumers will, at least for the short term, comprise two generations that may be classified as pre and post liberalization - with different "consumption cultures" and geographical imbalances will further make income generated from different sectors grow at different rates. The free market will strive to provide equivalent options to different segments of the population with non-equivalent opportunities.

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*Contributed by -
Suchintan Chatterjee,
Post Graduate Diploma in Computer Aided Managemnet (PGDCM),
IIM Calcutta.